(Bloomberg) -- There are “problems galore” in US office real estate and it’s so troubled that it’s difficult to underwrite, according to Victor Khosla, the founder of credit investor Strategic Value Partners LLC.
“There’s almost a tsunami coming through,” he said in an interview with Bloomberg Television on Thursday. “You don’t see it in the headlines quite as much, but underneath those debt maturities” are “causing a tsunami.”
Landlords for offices, apartment complexes and other commercial real estate have $1.5 trillion of debt due by the end of next year, broker Jones Lang LaSalle Inc. estimates, and many will have to refinance at higher rates. Offices are particularly vulnerable as demand has dropped following the rise of work from home and many of the buildings require substantial investment in order to make them attractive to tenants.
SVP has looked at 100 deals in the office sector over the past six to nine months and made just one, he said.
- Sees more opportunities for distressed investing in Europe than in US
- Says that while the economy looks calm on the surface, there’s a lot happening underneath
- Doesn’t see a cathartic moment coming, but there will be opportunities as companies work through high yield maturity wall over next three years
- High-yield defaults have risen to levels not seen since Covid, when distressed exchanges are included, he said
--With assistance from Kriti Gupta, Anna Edwards and Guy Johnson.
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